In Hans Christian Andersen’s “The Emperor’s New Clothes,” an emperor is left exposed after the fine clothing promised by two weavers turns out to be of no more substance than his own vanity. Subordination, non-disturbance and attornment agreements, also known as SNDAs, can similarly leave a commercial tenant exposed if not obtained, carefully reviewed and, as necessary, negotiated.

An SNDA is an agreement among a tenant, landlord and typically the landlord’s lender under which the tenant subordinates its lease to the lender’s lien on the property and promises to recognize the lender as landlord in the event the lender acquires the property, typically through foreclosure. In return, the lender agrees to leave the tenant’s lease in place so long as the tenant is not in default. The SNDA is commonly incorporated into the terms of a commercial lease. A lender whose lien attaches to the property subject to the lease is subject to terms of the lease and the tenant’s rights.

What many tenants do not realize is that first, if the lease is entered into after the lien is attached, that the provisions in the lease do not control and many lenders will not agree to the provisions unless the tenant executes an SNDA in lender’s form. The lender’s form of SNDA will often contain significant exclusions to a lender’s promise of non-disturbance that will leave an unsuspecting tenant exposed to unanticipated liabilities. These exclusions often include the following together with others:

The tenant will not have the ability to exercise certain remedies in the lease, such as the right to offset or abate rent;

The lender will not be bound by any amendments or assignments made without lender’s consent;

The lender will not be liable for any of the prior landlord’s acts or omissions; and

The lender will not be liable for any unpaid tenant improvement allowance.

There are just a few of the exclusions. A tenant should consult with capable legal counsel to review and negotiate the terms of the SNDA and avoid the cost and embarrassment of being left exposed by an SNDA that does not offer a tenant sufficient protection.

Search

Search for:

Legal Disclaimer:

Please note that the materials contained within this web site have been prepared by Jennings, Strouss & Salmon, P.L.C. for informational purposes only so that readers may learn more about the firm, the services it provides the background of its attorneys, and recent developments in the law. These materials do not constitute, and should not be considered, legal advice, and you are urged to consult with an attorney on your own specific legal matters. Transmission of the information contained in the Jennings, Strouss & Salmon web site is not intended to create, and receipt by the reader does not constitute, an attorney-client relationship with Jennings, Strouss & Salmon or any of its individual attorneys. While we would certainly like to hear from you, we cannot represent you until we know that doing so will not create a conflict of interest. Please do not send us any information about a matter that may involve you until you receive written authorization to do so from one of our attorneys. Unless otherwise indicated in individual attorney biographies, attorneys resident in the firm's various offices are not certified by the Board of Legal Specialization or a similar body of any state. This site may contain hyperlinks to websites operated by parties' independent from Jennings, Strouss & Salmon. Such hyperlinks are provided for your reference only. Jennings, Strouss & Salmon does not control such websites, and is not responsible for their content. Jennings, Strouss & Salmon's inclusion of hyperlinks to such websites does not imply any endorsement of the material on such websites or any association with their content. Your access and use of such sites, including information, material, products, and services therein, shall be solely at your own risk. Further, because the privacy policy of this site is applicable only when you are on this site, once linked to another website, you should read that site's privacy policy before disclosing any personal information. Jennings, Strouss & Salmon retains copyright of original content created on this site. If you wish to use information from this site, please contact clientservices@jsslaw.com for authorization.